Mistake (1)

Question 1

What is mistake in contract law?

Answer 1

Refers to a misunderstanding or erroneous belief about a matter of fact (‘mistake of fact’) or a matter of law (‘mistake of law’)

Question 2

What is the difference between a mistake of fact and mistake of law?

Answer 2

• Fact: (operative mistake) concerns, the rules relating to the validity of a contract; can render the contract void
• Law: cannot generally be used to escape liability from contractual obligations

Question 3

What do the terms void and voidable mean?

Answer 3

• Void: contract not valid/does not exist/not legally binding
• Voidable: although contract may be valid, it can be terminated. Contract can still be performed, but the unbound party can choose to set it aside.

Question 4

What can we learn in the case of Great Peace v Tsaliris [2002]?

Answer 4

• Even if there is no mistake at common law, in equity the contract may be voidable on the ground of mistake
• Property will pass and obligations will arise unless or until the contract is avoided (although right to rescission may be lost).

Question 5

How are the third parties impacted? (linking to void and voidable contracts)

Answer 5

• Void: 3rd party will never be protected
• Voidable: 3rd party protected

Question 6

Define ‘Mutual Mistake’ and ‘Unilateral Mistake’

Answer 6

• Mutual: BOTH parties have misunderstood each other’s intention
• Unilateral: ONE party at the time of making the contract was very seriously mistaken

Question 7

Define ‘Common Mistake’

Answer 7

BOTH parties at the time of making the contract make the same fundamental mistake.

Question 8

The case of Bell v Lever Brothers [1932], this defines what a fundamental mistake is. What can we learn from this case?

Answer 8

• HOL look into definition of mistake -> essential element of the contract subject + both parties necessarily affected
• Significance: mistake is not fundamental enough to render 2nd agreement void {more info in lecture slides}

Question 9

What are the categories of accepted mistake?

Answer 9

1) Both parties mistaken about existence of subject-matter of contract
2) Both parties mistaken about title to property (ownership)
3) Both parties mistaken about possibility of performing contract
4) Both parties mistaken about quality of subject-matter of contract

Question 10

What is the significance of mistake as to the existence of subject-matter of contract?

Answer 10

• A contract will be void if the subject matter of the agreement is non-existent
• Coutrier case: Since corn does not exist, there was a total failure of consideration and buyer not liable to pay price
• Galloway case: separation deed voided as defendant’s first wife was still alive
• Now supported by: Section 6 of Sale of Goods Act 1979

Question 11

What is the significance of mistake as to title to property?

Answer 11

• Applies where a party contracts to buy something which in fact belongs to him.
• Cooper case: Cooper already owner of salmon fishery therefore impossible for him to ‘rent own property’; void contract

Question 12

What is the significance of mistake as to possibility of performing contract?

Answer 12

• Mistake may be fundamental enough to avoid contract where both parties believe contract capable of performance when in fact it isn’t
• Shiekh case: physically impossible, as both parties did not know estate was incapable of yielding sisal quantity.
• Cooper case: legally impossible as title already belongs to him
• Griffith case: commercially impossible, as procession cancelled and they paid high price

Question 13

What is the significance of mistake as to quality of subject-matter of contract?

Answer 13

• Mistaken may be fundamental enough to avoid contract, but courts very hesitant about reaching that conclusion
• Leaf case: picture painted by Constable but, in fact not
• Harrison case: kapok was pure but in fact had bush cotton
• Oscar Chess case: Car was a 1939 model, not a 1948 model

Question 14

Based on the case of Great Peace v Tsavliris, what conditions are necessary to avoid a contract for common mistake? (set by COA)

Answer 14

1) Common assumption as to existence of a state of affairs
2) No warranty by either party that state of affair exists
3) Non-existence of the state of affairs must not be attributable to fault of either party
4) Non-existence of state of affairs must render performance of contract impossible
5) State of affairs may be existence of consideration; must subsist if performance of contractual adventure is to be possible